Dow falls more than 100 points as bank stocks struggle after earnings, Nasdaq rises slightly

U.S. stocks struggled for direction on Friday morning as weakness in bank stocks was balanced out by gains for tech and energy names.

The Dow Jones Industrial Average slipped 189 points, or 0.5%. The S&P 500 was flat, while the tech-heavy Nasdaq Composite gained 0.4%.

Bank stocks, which had outperformed in recent weeks as interest rates moved higher, were split in early trading as their reports appeared to underwhelm investors despite strong headline numbers.

JPMorgan Chase, the No. 1 U.S. bank by assets, showed profit and revenue that topped estimates, but shares fell 5%. The company’s earnings were helped by a large credit reserve release, and CFO Jeremy Barnum warned that the company would likely miss a key profit target in the next two years.

Citigroup’s stock fell nearly 3% after the bank beat revenue estimates but showed a 26% decline in profits.

Meanwhile, shares of Wells Fargo added 1% after the bank’s revenue topped expectations. CEO Charles Scharf said in a release that loan demand picked up in the second half of the year.

“The one thing that really jumps out is expense growth. You saw that in both Wells Fargo’s and JPMorgan’s numbers,” Gerard Cassidy, large cap bank analyst at RBC Capital Markets, said on “Squawk on the Street.” Wells Fargo already had plans for futures cost-cutting, which might explain its outperformance on Friday, Cassidy said.

On the data front, retail sales were down 1.9% in December, a worse reading than the 0.1% drop expected by economists surveyed by Dow Jones. Industrial production also disappointed, declining 0.1% compared to a projected 0.2% gain.

Elsewhere, shares of paint maker Sherwin-Williams lost 2.8% after the company warned that fourth-quarter earnings would miss estimates, citing issues in sourcing materials and staffing during the omicron surge.

Energy stocks rose, with Marathon Oil gaining 2.8%.

Casino stocks were another bright spot on Friday morning. Las Vegas Sands surged 12.5%, while Wynn Resorts gained 6.6%.

The jump came after Macau’s government announced it would allow just six casino licenses in the gambling hub. The companies rising Friday are among those that already are operating there.

Money-management behemoth BlackRock posted earnings that beat on bottom-line earnings but missed slightly on top-line revenue. Shares fell more than 1%.

The early market action follows a day in which a slew of Federal Reserve speakers said they expect to start raising interest rates in March. Fed Governor Lael Brainard remarked during her Senate confirmation hearing that rates increases are coming, while Philadelphia Fed President Patrick Harker told CNBC that, “We need to take action on inflation,” and he sees at least three hikes in 2022.

All of the major averages slid during regular trading on Thursday. The Dow and S&P 500 fell 0.48% and 1.42%, respectively, registering the first down day in three. At one point the 30-stock benchmark had been up more than 200 points. The Nasdaq Composite was the relative underperformer, shedding 2.51% and snapping a three-day winning streak as technology stocks came under pressure.

Tech stocks fell sharply in the first week of the year as the Fed signaled a more aggressive approach to inflation, and this week’s early rally has now been reversed.

“There’s a thought that the pricing in of a more hawkish Fed is a process, and not a week. Although a lot got done last week, this is going to be a process, and I think we’re probably going to have more volatile days in tech and growth stocks in general this quarter,” said Alicia Levine, head of equities at BNY Mellon Wealth Management.

“The first quarter should be rising yields, rising rates, outperformance of cyclicals, and we think that the long-duration growth names are going to have a challenging quarter,” Levine added.

In other data news, business inventories for November came in higher than expected, but January’s consumer sentiment reading from the University of Michigan came in lower than expected.

The reports come as investors closely watch all of the latest inflation readings. Readings for the producer price index and the consumer price index showed historic year-over-year gains this week but came in lower than some experts feared.

With Thursday’s move lower, the major averages are now in negative territory for the week. The Dow and S&P are on track for their second straight negative week, while the Nasdaq is on track for a third week of losses.